House OKs Bill Slashing Student Loan Rates

The House overwhelmingly approved a bill Wednesday that would cut the interest rate on many student loans in half.

The legislation would lower the rate from 6.8 percent to 3.4 percent in stages over five years for need-based loans.

The vote was 356-71.

The proposal would cost nearly $6 billion and affect nearly 5.5 million students who get the subsidized loans each year.

In passing the bill, Democrats were making good on a campaign pledge, though the measure was scaled back. Initially, the Democrats didn't say it would be limited to need-based, or subsidized student loans. On Wednesday, they conceded they would have to return to the issue to make college more affordable for more people.

The Democrats pushed the interest rate legislation through without amendments, eager to check off one more accomplishment in their "100-hours" list of early legislative goals.

The Bush administration opposes the bill, and Senate Democrats plan to bring up a more comprehensive measure that could complicate prospects for final passage.

The House version aims to reduce the bill's $6 billion cost by reducing the government's guaranteed return to lenders who make student loans, cutting back the amount the government pays for defaulted loans and requiring banks to pay more in fees.